The Monetary System- Chapter 10.docx

The Monetary System
The Meaning of Money
• Money is the set of assets in an economy that people regularly use to buy goods and
services
• Money has three functions: 1) Medium of exchange
2) Unit of account (yardstick)
3) Store of value (transfer purchasing power from present to
future)
• There are to types of money: Commodity money ( money with intrinsic value) and
Fiat Money(decreed to have value by government)
• Money in the economy includes currency and demand deposits:
M1 includes chequable deposits and
currency
M2 includes M1 and nonpersonal demand
and other
• Currency held by tax evaders and criminals to avoid paper trail
The Bank Of Canada
• Is the central bank of Canada and thus designed to regulate quantity of money in the
economy
• Managed by a board o